1) Describe how U.S. exports generate the demand for dollars and the supply of foreign exchange; and how the U.S. imports produce a demand for the foreign exchange and the supply of dollars.
2) Describe and recognize the different elements of the balance of payments.
3) Recognize the trade and balance of payments deficits or surpluses when provided suitable data.
4) Describe how the nation finances a ‘deficit’ and what it does with the ‘surplus.’
5) Describe how the exchange rates are calculated in the flexible system.
6) Describe how the flexible exchange rates remove the balance of payments disequilibria.
7) Explain the 5 determinants of the exchange rates.
8) Explain 3 drawbacks of the flexible exchange rates.
9) List 3 ways a nation could control the exchange rates under the fixed rate system.
10) Explain the system based on gold standard, the Bretton Woods system, and the managed float exchange rate system.
11) Explain the two effects of the trade deficit.